2
Budget Definition - from French bougette or purse -a list of all planned revenue and expenses Used as a tool to assist in making operating decisions and provides a framework for future growth Assists in setting expectations, targets and goals Used to forecast or model based on strategies, events, plan or projects

3
Budget – Nuts & Bolts Revenue/Income Expenses Margin Metrics

4
Revenue/Income Definition – income or expected income from activities related to an organization including goods and services Patient Services Research Investments Donations Other income

5
Gross vs Net Revenue/Income Gross is total revenue/income generated. Net is the gross revenue/income less taxes, allowances and deductions. Net pay is gross income less taxes Net revenue is patient charges less insurance allowance/reimbursement and bad debt Research fund less indirect costs

6
Expenses Definition – outflow of money to pay for an item or service, or for a category of costs Payroll Benefits Supplies Other Operating Building

10
How do you build a budget Expenses Develop cost/expense per activity Breakdown into specific expense categories Include growth projections/assumptions and inflation Calculate the total cost/expense

11
How do you build a budget Time frame will vary depending on the type of budget Operating – 1 year New programs/projects – 1 to 3years

12
Budget Review Review actual versus budget variances periodically, monthly, quarterly, yearly Use year end actual to plan for the next year Review processes or strategies to increase income/revenue or decrease expenses

13
Budget vs Forecast Budget is a static plan, does not change throughout the plan period until the next period. Forecast is an updated plan and a prediction of performance. Supports flexibility to incorporate changes that may occur throughout the plan period.

16
Metrics If you cant measure it, you cant manage it Develop measurements to evaluate performance, key performance indicators are used to develop targets/objects Metrics are used to assess current financial position Metrics are ratios that present financial information and makes it easier to compare/benchmark Metrics can be a combination of operational and financial indicators Represented by ratios, example: Operating Margin = Net Income Sales Productivity = Sales Revenue FTE